These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Lecture!17!!Outline(of(Last(Lecture((I. Supply!of!Money!II. Money!Demand!Outline(of(Current(Lecture((I. Real!Economy!II. Keynesian!System!!a. Supply!and!Money!Demand!in!the!Money!Market!b. Money!Supply!Curve:!Targeting!the!Money!Supply!for!Growth!c. Aggregate!Supply!!d. Interest!Curve!III. People!Influence!Transactions/Money!Supply!IV. Monetarists!!Current(Lecture!1. Real!Economy:!The!part!of!th e!economy!that!is !concerned!with !actuall y!produ cin g!goods!and!services,!as!opposed!to!the!part!of!the!economy!that!is!concerned!with!buying!and!selling!on!the!financial!markets.!2. Keynesian!System:!a. Supply!and!Money!Demand!in!the!Money!Market!!!!r*!=!Interest!Rate!Equilibrium!!b. Money!Supply!Curve:!Targeting!the!Money!Supply!for!Growth!!c. !*Although!there!is!a!large!gap!between!MS1!and!MS2,!Money!Supply!increases!can!be!quite!small!to!keep!Money!Supply!at!a!minimum!and!increase!Interest!Rates.!!!((((((ECON(104(((11th(Edition(! !d. Aggregate!Supply!!E:!Aggregate!Expenditure!/!Y:!Income!/!E1:!AE=!C+I+G!/!E2:!AE=!C+I+G!2!e. Interest!Curve!(3. People!Influence!Transacti on s/Mon ey!Supp ly(a. Reluctant!Borrowers:!Just!Because!Interest!Rates!are!low;!this!doesn’t!mean!that!people!will!borrow.(b. Reluctant!Lenders:!Banks!are!reluctant!to!lend!money!due!to!their!large!amount!of!reserves.!(c. Liquidity!Trap:!When!Interest!Rates!are!so!low!that!the!Federal!Reserve!System!finds!it!impossible!to!lower!them!any!further.(4. Monetarists:!The!“Respon se”!to! Keynes!System(a. Equation!of!Exchange:!MV!=!PQ(i. M:!Money!V:!Velocity!(How!often!Money!is!Spent)!P:!Price!Level!Q:!Output(ii. MV!=!PQ!is!equal!to!D!=!S!and!AE!+!GDP(b. Increased!(M)!Fixed!(V)!=!Increased!(P)!Fixed!(Q)!:!Using!monetary!policies!to!control!prices!is!very!effective.(!
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